Buying a home will probably be the most expensive purchase a person makes during their life. In order to finance a home, a mortgage is usually necessary. Below are some mortgage basics every homebuyer needs to know.

How much home can you afford?

Purchasing your first home is exciting, but can be overwhelming for many first time buyers. Having your finances in order is a must. It’s important to determine how much home you can afford and whether you should rent vs buy a home. The rule for buying a home is that you monthly mortgage payment shouldn’t be more than 32% of your total monthly income. So if you make $5,000 per month (that’s $60,000 per year) then your monthly mortgage payment should be no more than $1,600 per month.

Mortgage Rates

There are primarily two types of rates. First, there is a fixed rate mortgage,which has a locked rate for the entire length of the loan term (usually 5 years). This means that if the interest rate is at 3.5%, it will remain at that rate the entire length of the term.

The second type is a variable rate or floating rate. This rate fluctuates every month depending on a variety of factors such as the economy and policies set by the Bank of Canada. Current veriable rates are around 2.5% or so.

Down Payment & Mortgage Insurance

The down payment is the amount of money you need to pay upfront. The more money you pay upfront, the less your mortgage loan will be. By law, Canadian banks require a 20% down payment, unless you have mortgage insurance. Mortgage insurance protects the financial institutions that are lending in case the homeowner defaults. If you have mortgage insurance, your down payment can be low as 5%. The insurance premium is paid when your home closes. It can be paid up front or added to the principal amount of your mortgage.

Open vs Close Mortgages

When you have a mortgage your expected to pay the entire amount plus interest. The term, or amount of time the mortgage conditions are in affect. Terms range from six months up to ten years. Once the term has ended, the mortgage can either be paid off or renewed.

The term can be opened or closed. Open term mortgages can be repaid at any time in full during the term without a penalty. You may benefit from an open term mortgage if you plan on paying off your mortgage quickly, however the interest rate may be higher. A closed term mortgage is a better choice if you’re planning on living in you home for the long run. With a closed term mortgage there is a penalty for paying off your mortgage before the term ends, however, interest rates tend to be lower.

Get Pre-approved

Don’t start home shopping until you get pre-approved. A mortgage specialist will look at your finances to determine what you can afford. Once pre-approved, the interest rate is set and guaranteed for 120 days.  This way you can work with your realtor in finding the perfect home for your budget.

Greenify Your Home & Life, 10 Ways to Add Value and Save Money

Green is the new black. I don’t mean the color green; I’m talking about things you can do to make your home green and energy efficient.  With today’s cost conscience consumers, adding green features can increase energy savings and at the same time reduce your carbon footprint. Some of the items listed below may also tip the buyer toward purchasing your home.  Check out these 10 ideas to greenify your home.

1)    Use Energy Efficient Lighting

Compact fluorescent lights (CFLs) or light emitting diodes (LEDs) are a quick and easy way to make you home more energy efficient. These bulbs use 80% less energy than traditional ones and last 10 times longer, which reduces landfill waste. Consider opening the blinds during the day to let in as much natural light in as possible. This is also a great tip when showing your home. Buyers tend to like homes with a lot of bright natural light.

2)    Get rid of that old, inefficient water heater

When it’s time to replace that old water heater, it’s a perfect time to upgrade to energy efficient one. There are many types of water heaters on the market, from solar powered to tankless water heaters, which can generally are 20-50 percent more efficient.

3)    Get your heat and ac from mother nature

Homeowner’s highest energy use and cost comes from heating their homes in the winter. Using Mother Nature is a great way to reduce cost and go green.  There are several options to heat your home using the power of the planet. Using solar power or geothermal heat pumps are two viable options that are becoming more popular with homeowners.

4)    Don’t Use Plastic Disposables

In 2012 nearly 1.5 million tones of garbage went into the Vancouver landfill. That’s enough to fill over 72,000 garbage trucks. One way you can reduce the amount of garbage is to discontinue your use of plastic disposables. Even though they are easy and convenient, there are better options. Consider switching to compostable plates or just use your regular dinnerware.

5)    Get Energy Efficient Appliances

Get rid of old appliances and switch to new energy efficient ones. This can decease your energy use up to 50 percent. Plus, having newer appliances when you sell your home is a big plus for buyers.

6)    Upgrade You Insulation

Upgrading your insulation is one of the best ways to save on heating and cooling cost. Start our by making sure your roof and attic are well insulated. If you have enough insulation there, move to the walls of the home and the basement if you have one.

7)    Seal Your Home

Seals around windows and doors over time will get old and crack causing the home to waste a lot of energy. Many homes have enough leaks that it would be the equivalent of having a small window opened all year round. Sealing also creates better humidity control, lessens pollen, dust, insects, and lessens ice dams during the winter.

8)    Donate and Recycle Unwanted Items

Spring is coming and it’s time to get the home cleaned up. Getting rid of stuff you don’t use any more is a great way to declutter and get your home ready to sell. Consider donating old toys and clothes, and recycle your old computer that’s been sitting in the garage.

9)    Add Air Purifying Houseplants

Adding live houseplants is a great way to brighten up the home, get rid of odors, and leave the air in your home feeling fresh and clean. Buying a couple of plants is a cheap and easy way to decorate you home before a showing.

10) Use Natural Cleaners

 Have you looked at the label of you favorite cleaner recently? How many of those ingredients can you pronounce? There are many environment and health benefits for using natural cleaners. If you want to save money, you can easily make your own using simple everyday ingredients and they are just as effective.